Shyam Metalics Gets UBS' Most Bullish Target Price As Brokerage Initiates 'Buy'

Brokerage firm UBS initiated coverage on Shyam Metalics and Energy Ltd. with a 'buy' rating, at a target price of Rs 1,200 per share, implying a 60% upside from the share's closing price on Wednesday.

The price target is the highest among brokerages tracked by Bloomberg.

The brokerage values the company at eight times its expected earnings before interest, taxes, depreciation, and amortisation for financial year 2026-27.

This valuation is in line with other similar companies and reflects Shyam Metalics' focus on high-value products, strong earnings outlook and reduced risk due to its diverse metal products, UBS said.

Shyam Metalics is moving from making basic products to high-value items like battery-grade aluminum foil, which should boost its profit margins and make it less affected by changes in commodity prices, it said.

Though the metal producer is smaller than its competitors, it is more flexible and efficient due to its backward integration, it said. "With more high-value products, we expect its return on capital to rise from 22% in fiscal 2024 to 28% in fiscal 2027."

UBS also projects strong profit growth, with an expected annual increase in earnings of 39% from fiscal 2024 to fiscal 2027.

The company plans a Rs 10,000-crore capex from fiscal 2022 to fiscal 2027, funded by internal resources, said the brokerage report. It also expects the new projects to be completed by fiscal 2027, with Rs 2,500 crore to be capitalised in fiscal 2025 and the remaining Rs 4,900 crore in financial years 2026-27.

This capex could increase Ebitda by Rs 2,600 crore over three years, resulting in annual growth rates of 39% in Ebitda and 50% in profit from financial year 2024-27, UBS said.